In the manufacturing industry, the production of finished end products often involves the production and use of intermediate products and by-products. Raw materials are processed into an intermediate product, possibly generating one or more by-products, and the intermediate product is then processed into the finished end product, possibly generating one or more additional by-products. For example, to produce foam seating cushions, a manufacturer may combine two raw materials, an amine and a phosgene. This produces isocyanate, an intermediate product, and hydrochloric acid, a by-product. The isocyanate is then processed further to form the foam cushions.
Manufacturers also often attempt to sell the intermediate products and by-products to other manufacturers or enterprises. This may provide additional sources of revenue. As another example, because a by-product may be a hazardous material, government regulations may prohibit the manufacturers from dumping or burning the by-product. Despite their desire to do so, many manufacturers have difficulty producing a consistent revenue stream or otherwise disposing of their intermediate products and/or by-products because they typically cannot predict customer demand for those products.
In addition, a first manufacturer may enter into an exchange contract with a second manufacturer. Under this contract, the first manufacturer may be required to supply a product to the second manufacturer in one geographic location, and the second manufacturer may be required to supply a product to the first manufacturer in another geographic location. Manufacturers typically do not consider the state or the terms of their exchange contracts when determining demand for a product and planning production of the products.